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Pursuant to a congressional request, GAO investigated issues related to the implementation of the U.S./North Korean Agreed Framework, focusing on the: (1) status of heavy fuel oil funding and the deliveries to North Korea undertaken pursuant to the Agreed Framework; and (2) controls in place to prevent the diversion of heavy fuel oil from heating and electricity generation to other purposes not specified in the Agreed Framework and any limitations in these controls that would allow North Korea to divert heavy fuel oil.

GAO noted that: (1) as of July 31, 1999, 1.9 million tons of heavy fuel oil had been delivered to North Korea at an approximate cost of $222 million; (2) for the first 3 years of the Agreed Framework's implementation, shipments to North Korea did not occur on a regular and predictable schedule because the Korean Peninsula Energy Development Organization (KEDO) did not always have sufficient funding to pay for heavy fuel oil deliveries; (3) for the past 2 years, shipments of heavy oil to North Korea have been made more regularly because of increased contributions from the organization's members and decreasing commodity and freight prices; (4) because of rising freight and commodity prices, a KEDO official stated that the organization would need about $10 million in additional funding above existing or promised contributions in order to pay for the remaining 1999 heavy fuel oil deliveries; (5) the Department of State and KEDO, with the cooperation of North Korea, have implemented a monitoring system at the seven heating and electrical generation plants that use KEDO-supplied heavy fuel oil; (6) the purpose of this monitoring system is to ensure that the heavy fuel oil is used only for heating and electricity generation at the seven power plants; (7) KEDO's portion of the system consists of meters to measure fuel flow, recorders that compile daily and cumulative flow data, and periodic monitoring visits to each plant; (8) power outages and poor quality of North Korea's electrical power supply have affected the operation of the monitoring equipment; (9) KEDO's monitoring system alone is not designed to provide complete assurance that the heavy fuel oil delivered to North Korea is being used as prescribed by the Agreed Framework; (10) there are no arrangements with North Korea for monitoring the large quantities of heavy fuel oil in storage or in transit to the plants consuming the heavy fuel oil; (11) however, the U.S. government uses other national technical means to supplement KEDO's monitoring equipment to provide additional confidence that the heavy fuel oil is being used for heating and electricity generation; (12) State officials have acknowledged that there is some evidence that perhaps 5 percent of the heavy fuel oil has been used for unauthorized purposes; and (13) according to State, there is no clear evidence of any significant diversion to unauthorized purposes of the 500,000 metric tons of heavy fuel oil delivered annually to North Korea.